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Two Micro Caps You Haven't Heard Of: Epicore Bionetworks (EBN) And Terra Firma Capital (TII)

|Includes: Epicore Bionetworks, Inc. (EPCBF), TFCCF

I recently added both EBN and TII to my watch list. They both look attractive and I may add a position in the future, but given that I currently have 22 holdings and like to keep my portfolio concentrated, I don't plan on adding in the immediate future, unless the market makes these too cheap to pass up.

Epicore Bionetworks develops natural microbes and enzymes to the global aquaculture industry. This helps to eliminate pollution and increase productivity, creating healthier stock. The shrimp industry is their key market.

For the fiscal year ending June 2013, sales were flat and net income was down 25%. Farm closures due to disease hurt sales and profitability. However in the first two quarters of fiscal 2014, sales are up 35% over last year, while profitability is up over 300%. The trailing P/E ratio is 10.3. Over the past 5 years, sales growth has averaged 13%, but that includes 2009 and 2013 that had zero growth.

The firm consistently increased equity every year over the past 5.5 years. Equity has gone from $1.97 million in 2008 to $6.08 million for the quarter ending Dec. 2013. The price-to-book is a reasonable 1.3. There is now $2.6 million in cash on the balance sheet and $1.2 million of total liabilities.

Insider ownership is high, with the directors of the firm owning 26% of the company.

Terra Firma is a real estate finance company operating in Canada. It offers mortgages, land loans and mezzanine financing on property developments.

The company is fairly new, having only $136K in revenue for 2010. They have grown significantly over the past few years, with revenue in the first 9 months of 2013 at $5.8 million. The company has been profitable for the past four years and the trailing P/E is 10.7. The market value is currently just above book value. If P/B goes down to 1.0, it may be an attractive entry point.

One of the directors of the company is my former Corporate Governance professor from my MBA. This helps give me comfort in the governance structure for this firm. A concern is the overvalued real estate market in Canada. If there is a correction, this company may get singed.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.